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Private Equity

special Transforming Knowledge into Practice

X-Thinking in Private Equity

PortfoliosAdvanced Approaches in Operational

Performance Improvement

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3Private Equity

The private equity sector needs to develop its business model. While available

fund volumes are rising, the number of investment targets is stagnating. This

has driven acquisition multiples up and brings with it the challenge to reach

“normal” return levels. While operational performance improvement is gaining

in importance, new methods of advanced value creation are needed.

It is precisely in this area that we at h&z have gathered many years of

experience. We know all the main levers on the operational side and can use

them to create additional value along the entire value creation chain with an

effective increase in EBITDA.

In the lead article on page 5 you will read about just what we mean when we

talk about approaches to operational value growth in internal and external

value creation. In many cases, these approaches can be applied across portfolios

as well.

The article on page 12 addresses the myth that company value in portfolio

companies should mainly be increased through sales and growth. The role that

operating partners play in this, what their tasks are, and why there are more

and more of them, are described in a further article (page 16). In addition, the

article on page 20 looks at why targeted expectation management needs to

accompany the implementation of operational changes.

We wish you informative and inspiring reading!

Editorial

Rainer Hoffmann (Managing Partner) and Dr. Joachim Dettmar (Partner)


4 Private Equity

Contents

Published by h&z Unternehmensberatung AG, Neuturmstr. 5, 80331 Munich, Tel. +49 (0)89 242969 - 0, Fax +49 (0)89 242969-99, [email protected]. Design and implementation by living-crossmedia (lcm) Munich,

www.living-crossmedia.de Graphics lcm Editorial Dept. h&z Unternehmensberatung AG, Printer Bosch-Druck GmbH; Ergolding Repro Peter Becker GmbH, Würzburg Paper Heaven 42 – FSC-zertifiziert; Photos h&z, fotolia.de

Trends in Private Equity Value Creation

5 12 16War of Opinions: Revenues vs. Cost Improvement for Value Creation

Managing Expectations

18Case Study: Performance Improvement through Expansion in the Asian Market

20 “Operating Partners” Increase Focus on Operational Performance

23Authors

Company Profile



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Figure 1: Development of fund volume and number of European transactions

From Classical Growth to Operational and Cross-Portfolio Performance Improvement

The challenges faced by private equity funds are increasing. While available liquidity has developed over the past six years with an average of 19% per year (see Figure 1), the number of actual transactions has been stagnant. In light of this high level of liquidity in the market (“dry powder”) and the stagnating number of available target companies, the competition for transactions has been hotting up, with the multiples increasing. For investors, this means either they overpay for a transaction today, or they pass on it.

Source: EVCA

2009

Fund volume in €bn # transactions

2010 2011 2012 2013 2014

50

40

30

20

10

0

20,000

16,000

12,000

8,000

4,000

0

18.921.8

41.6

24.6

54.4

44.6

High Level of Dry Powder Changes Portfolio Strategy

When Siemens’s Audiology business was sold to the financial investor EQT, Siemens achieved an EBITDA multiple of 14.8, a figure that is clearly above the multiples common in previous years. While multiples like these are not unusual today, they do raise the question of how such business cases are still generating returns. Conventional measures that aim for revenue growth and financial leverage are no longer sufficient. Operational performance is gaining in importance, especially on the often neglected cost side, because measures to increase revenues are easier to plan and initiate “from the

19% p.a.


7Private Equity

outside.” An example here is the typical Ansoff approach. New markets are identified for existing products and solutions, and then their dynamics and barriers to entry can be investigated from the outside with proven standardized methodologies.

Cost and value creation structures, on the other hand, are often quite company specific. In this case, a standardized outside-in approach seldom yields the required results. The challenges often lie not only within the company’s processes and fixed assets, but particularly in its culture, management style, and its employees’ experience and behavior. This can also vary significantly within one company across different locations and countries. The challenges are multi-layered and there are no textbook frameworks, such as the Ansoff matrix, for operations.

Thus, special expertise is required to tackle operational value creation potentials not just within the industry, but also when it comes to functional topics along the whole supply chain. This includes production, logistics and procurement, as well as cross-functional optimization topics such as business modeling, strategy and M&A, and organizational and dimensioning matters.

Fast Impact on EBITDA

The advantage of operational measures is their relatively fast, positive effect on the bottom line, which, as mentioned earlier, can generally be achieved through cost optimization. This entails not only headcount adjustments, but initiatives that particularly optimize internal and external value creation (see Figure 2).

In the end, with today’s multiples, each additional euro in the EBITDA margin generates eight or more times its worth in equity value. Operational value creation potential can also be a powerful tool to provide incentives to management. After all, management usually has a stake in the company itself.

Increase revenues

Reducecosts

Organic growth 5-20%

SG&A 2-10%

>>10%

COGS 2-20%

Capital employed 0-50%

M&A

Levers Typical impact

Figure 2: Performance improvement – value creation tree


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Figure 3: Process for fast EBITDA improvement

Exploration(1-2 weeks)

Realization(1-3 months)

Mid-term support (optional)

• Data request and review• Site visit and interviews• Benchmarking and analysis• Outside-in assessment

• Indicative performance improvement potentials

• Realization roadmap

• Joint kick-off • Realization of quick wins • Implementation of mid-term

initiatives• P&L impact realization

through budget adjustments

• EBITDA impact in P&L • Working capital reduction

• Strategic business modelling

• Growth programs, M&A• Organization &

dimensioning• Functional initiatives

• Additional EBITDA impact• Operational excellence

Act

ivit

ies

Res

ults

Go/ No-Go

Margin Effects in External Value Creation

Measures in procurement, for example, may already generate significant effects within just one or two months. Renegotiations and tenders alone quickly lead to competitive market conditions, often without the need to switch suppliers. This can be done while avoiding discussions with employee representatives about headcount adjustments or one-time settlement costs. Particularly in the mid-market, where most of the private equity portfolios are located, the degree of maturity within procurement is typically low and still characterized by supplier relationships grown over many years. Instead of tenders in the market, a handshake mindset prevails. Business with external suppliers is anchored in personal relationships between players. On the supplier side, this is usually between sales and/or management, while on the customer side, it involves functional departments or production directly. A quality mindset is predominant, while in comparison, cost awareness is often less distinct.

At h&z, we know from experience that just by using the tools of procurement, potentials in the medium two-digit percentage range relative to the addressed external value creation volume can be achieved in the short term without layoffs (see Figure 3).

Margin Effects 4.0 from Cross-Portfolio Optimization

If cases are combined across several companies in private equity portfolios and tendered at the market in bundled form, the savings, and therefore the effects on the bottom lines of the participating companies, can be increased significantly simply through the scale effect of the bundled purchasing volume. Tenders can be placed comprehensively and are only turned into individual contracts between the participating portfolio companies and the awarded suppliers at the very end. This ensures a sustainable effect of the measure since the conditions remain in effect even if a sale takes place. Figure 4 shows examples of categories in which cross-portfolio levers have already been successfully used. The focus of cross-portfolio procurement initiatives lies on indirect category groups, as these exist in most portfolio companies, while direct categories (production material) are highly business-specific and thus less appropriate for pooling models.


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Figure 4: Categories for cross-portfolio optimization (examples)

Logistics

Temp labor

IT hardware

Travel management

MRO

Fleet

Savings achievements from external cross-portfolio optimization measures in indirect materials usually end up in the range of 8-15% with regard to the addressed volume. As a rule of thumb based on h&z’s project experience, the addressed volume usually lies in the range of 50-70% of the total indirect purchasing volume (not everything is addressable by procurement, e.g. taxes on utilities or lawyers). Figure 5 depicts the typical savings estimate from bundled procurement volumes in indirect (non-production) materials.

Figure 5: Indicative cross-portfolio savings potential indirects categories

Portfolio company 1

Portfolio company 2

Portfolio company 3

Share of indirects on total external purchasing volume%

Total indirect purchasing volume

Not addressable

Addressable purchasing

volume

Optimized indirect

purchasing volume

100% 8-15%

30-50% of

total volume

Typical savings from

cross-portfolio bundling

70%

45%

20%


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Joint Realization of Potentials

A crucial factor for the sustainable success of cross-portfolio initiatives is the commitment of the individual portfolio companies. A top-down approach does not work. Experience has shown that the portfolio company must have the choice of participating in cross-portfolio approaches. Mutual trust and the intrinsic desire to exchange and share information are indispensable for the success of such measures. Each portfolio company that decides to participate designates a representative. The representative works closely with the project team and functions as a central contact for all topics affecting “his” portfolio company. Conversely, he is responsible for handling data inquiries and opening doors to the company. In addition, he participates in all of the project team's important meetings.

Risk Minimization

Optimization measures in procurement reduce costs and also proactively minimize risks, an effect that will pay off down the road when the company is sold. This helps to avoid less favorable valuations by interested parties after the due diligence. The following example illustrates this added value. At a company from the medical sector, all completely assembled products that were packaged in a clean room were sent to sterilization before shipping. The company only had one service firm in the region that was able to provide this particular form of sterilization. In other words, the company was highly dependent on this one service provider (key word “single source”). If this service provider raised

Best Practice Example: Cross-Portfolio Optimization in LogisticsA good example comes from the logistics commodity group, which offers high potentials, especially in the PE portfolios of manufacturing companies. The problem with logistics tenders in single portfolio companies is that the transports between the shippers and the consignees are only filled one-way, as the manufactured goods are transported from the factory to the customer or distributor. On the way back the truck is empty. This is then reflected in higher offered prices. In cross-portfolio logistics optimization, however, synergies arise from filling up unused capacity in the trucks with cargo from various portfolio companies. Utilization increases, which is then reflected in significantly lower prices. The typical savings effects are often in the two-digit percentage range.


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prices, the company would be forced to accept this, even if its margins were severely affected. If this dependency were to surface during the due diligence process, it would lead to a reduction of the enterprise value. Professional supplier management, however, identified this risk within the external value creation ahead of time. An early qualification of alternative suppliers not only secured the operational business in the portfolio company, but also increased the value of the company towards the exit.

Sustainable Potentials in Internal Value Creation

In the mid-sized sector especially, there are often large potentials hidden in internal value creation. For example, yield rates can be increased through the reduction of scrap. Specialized consultancies can provide production experts with many years of experience in the area of quality management. Among other things, they analyze the current state of production in optimization workshops and identify sources of error. Subsequently, solutions are developed, tested and implemented. This is often combined with the optimization of production processes. In this context, the wealth of experience of senior production experts provided by external consultancies is invaluable.

A Matter of Cash

While an improvement of the cash position only indirectly affects EBITDA, the company value can be improved by an optimization of the cash structure, namely trade payables, receivables and inventories. In conjunction with the above-mentioned tenders and renegotiations with the suppliers, there are often unused potentials when it comes to terms of payment, especially in the mid-sized sector. Positive effects can be achieved by adjusting the payment terms and bonus agreements, both on the supplier side (trade payables) and the company side (receivables). Another example is the optimization of supply chain planning, which has a direct effect on the so-called cash conversion cycle. By optimizing the control of supply and demand, inventory structures can be improved and fixed capital can be released.

Operational performance improvement approaches offer significant potential for fast EBITDA impacts. Our project experience shows that this is particularly true in the mid-market environment, where maturity levels in the respective functions are less distinct and associated optimization potentials are high. In more mature environments, we recommend cross-portfolio approaches in order to leverage the combined market power of all participating portfolio companies for extended EBITDA impacts.


War of Opinions: Revenues vs. Cost Improvement for Value CreationThe majority of private equity firms count on the market when trying to increase value, taking measures in their portfolio companies, in order to grow organically. Externally, they increase company value through M&A activities abiding by the motto “buy and build.” These strategies follow the “search mechanisms” that private equity firms utilize in expanding their portfolios and upon which they base their investments. Accordingly, private equity firms are usually primarily concerned with expanding their product portfolio, strengthening company position in global competition, acquiring companies in markets with structural growth, or with a business based on megatrends as well as strengthening their own position in consolidated markets. These goals substantiate the myth that company value

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can be increased primarily through sales. Measures to expand sales activities have thus come “into fashion,” as has focusing on key-account customers and A-customers, or alternatively, regionalizing the product portfolio with differentiated sales work.

An Old Merchant’s Rule Now Forgotten

The market prophets of the world argue that “nothing is earned without sales.” But that’s only half of the truth. In the first place, prices are set on the market and are only partially suited to increase EBIT. Sales will increase quantities, but the profit per unit remains the same.If one were to follow the merchant’s rule that “the profit lies in the purchase,” the goals of private equity firms would be somewhat different. In order to increase company value, they would be concerned with increasing operational performance strength with a focus on the cost side along the entire value creation chain.

Only at first glance does it seem to be more costly to improve operational performance strength and company value through specifically tailored measures. The effect that cost optimization has on the EBITDA margin, shows the real picture, however. Given an EBIT margin of 10% and a material cost share of 45%, for example, a cost reduction of 2% is already enough to influence the EBITDA just as strongly as would a sales increase of 18%. This casts a completely different light on the effort toward performance optimization on the cost side.

Value Creation Know-How is Needed

Whoever not only reduces costs, but actively shapes them as well, will gain the greatest possible increase in company value. The art lies in selecting and applying measures with the greatest potential for cost reduction. Off-the-shelf solutions will only let one harvest the “low-hanging fruits.” These have usually already been grabbed when a private equity investor comes to a company. In order to optimize further costs, technical expert knowledge along the entire supply chain is required, starting from efficient production technologies, moving through supply chain optimization including purchasing and IT, and continuing up to changes in planning processes in all areas of the company. Often, process chains are rebuilt, purchasing strategies are developed, suppliers are controlled more actively, IT systems are adjusted, and employee areas of responsibility and working methods are changed. In addition to technical expert knowledge, this requires the active transformation of the entire operational organizational units. Building up a suitable metrics-controlled system in parallel ensures that cost goals can be measured and makes it possible to incentivize the top management and the team of leaders.

Whoever takes to heart the lesson that one should not only focus on the market side, but that the value of a company is significantly increased through operational performance management, will be able to chalk up successes in a matter of months.

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Privat Equity and Cross-Portfolio Initiatives

Typical impact of cross-portfolio procurement initiatives

On average 11% direct EBITDA- impact through all cross-portfolio procurement initiatives

11%

Private equity in Germany

# of active PE fund managers headquartered

in Germany

EUR

10.3Billion

284Total amount of PE dry powder available to Germany-based fund managers (as of 09/2015)


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2% Material Reduction

18% Sales Growth

Proportion of German-based private equity firms by primary strategy*

Source: www.preqin.com * Other 13%

Private equity investments in Germany between 2008 - 2014

Investments in €m

40

20

0

80

100

60

2008

9,584

2009

3,024

2010

4,895

2011

6,667

2012

6,626

2013

5,005

2014

7,060

50% Venture Capital

22% Buyout

8% Growth

7% Distressed

Private Equity

Impact of cross-portfolio procurement initiatives on enterprise value2% decrease of material costs would increase the EBITDA the same way as 18% sales growth.(in case of 10% increase of EBITDA margin and an assumed 45% share of material reduction)

Source: BVK/PEREP Analytics


Managing ExpectationsThe expectations of investors and those of the operational management of investment portfolio companies are not always identical when it comes to value creation projects. While investors most commonly focus on maximum value creation with a view towards its exit, other non-monetary criteria might be important to the local management. Some examples of what is meant by ‘non-monetary criteria’ can be seen below.

• Long-term,organicallygrownrelationshipswithkeysuppliersThe company may hesitate to enforce the most commercially favorable solution if, for example, it shares a history with suppliers, during which they helped each other through tough times.• InternalcapacitiesIf value creation structures are adjusted, internal resources must be made available to manage the projects. However, these resources may not be readily available.• SustainablesolutionsThe notion of the ideal degree of vertical integration may extend beyond a mere commercial focus.

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Balancing Expectations and Target Setting

The combination of many years of industrial and functional expertise shared by the participating consultants, along with extensive project experience in the private equity sector, are crucial during such optimization processes. In the end, “ruinous cuts” affect the return just as negatively as passing up potentials. Managing investors’ expectations and those of the operational management of the portfolio company become increasingly challenging when the two parties have potentially conflicting goals. After all, the objective is to achieve quick and significant effects on the EBITDA margin while implementing the measures in a sustainable and cooperative manner. In this situation it can be very helpful to use an external, “neutral” third party between the shareholders and the operational management. On the one hand, an external consultant can help the operational management develop measures to meet the improvement targets that shareholders have prescribed for the company. On the other hand, the opinion of a neutral thirdparty can be helpful for shareholders if targets prove too high.

Figure 6: The consultant between operational management and investor

Consultant

• Extended performance improvement

• Implementation speed • Exit realization

• Performance improvement

• Existing business relationships

• Workforce situation

Goa

ls

Goa

ls

Generally, the networks of the participating consultants help to find the right specialists. As a rule of thumb, the larger the network, the greater the chance of finding the right specialist for a specific problem.

Operational management

Investor

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Best Practice Example An example from a manufacturing company in the B2C sector illustrates the benefits of this concept. The company had a very specific production process, but in spite of all attempts to reduce the level of scrap it had remained in a double-digit percentage range for many years. Utilizing the experience of an h&z production expert and his network in high-end academic research institutions for materials science, the underlying cause was identified within a few weeks and subsequently eliminated. The level of scrap was reduced to an acceptable single-digit percentage range.


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Together, Fiducia Management Consultants and h&z have advised international private equity firms and their portfolio companies on realizing their China growth strategies. A key component of this is ensuring that existing investments are compliant with Chinese and international regulations. In the following case study, we will explain by using the example of a leading European manufacturer of highly efficient and eco-friendly energy generation plants. We were able to leverage our joint understanding and expertise of Chinese and European mindsets, offering a tailor-made solution meeting the client’s individual requirements.

The company, already one of the market leaders in China, hired us to develop a customized expansion strategy for their China operations. The starting point was a tailor-made market analysis that prioritized high growth segments and clearly outlined underdeveloped segments, which the company could pursue in the future. Our assignment was to forecast revenue and profitability growth in six key application segments, customer behavior and the competitor landscape. In addition, they asked for suggestions for a new distribution framework, profiling three highly attractive partners in depth, while also evaluating the existing in-house sales team and current third-party distribution partners. It was crucial for the client that the suggested strategies and partners matched their expectations regarding company values, compliance standards, and quality requirements. Being a European company, they emphasized the importance of finding partners that could bridge Eastern and Western mindsets.

Case Study: Performance Improvement through Expansion in the Asian MarketAuthor: Stefan Kracht, Managing Director of Fiducia Management Consultants


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Fiducia and h&z structured the project into two phases, first providing high-level market trends to allow for an effective distributor search in the second step. Phase 1 was made up of over 30 interviews with key customers, competitors, distributors, and third party experts. After extensive primary research and benchmarking, we developed a short-term, then a mid- to long-term expansion strategy that would, first, enhance the client’s market share and improve customer satisfaction, and later, stimulate new demand by using design-to-cost levers and differentiating the services. Based on an analysis of customer behavior, which required a thorough understanding of the behavior of Chinese customers, we developed a comprehensive picture. Moreover, the client received a competitor landscape report, which was a result of phone interviews conducted in Chinese. Due to these various analyses, the client was able to retain customers and enhance their satisfaction, and capture new after-sales opportunities by creating new products and services suited to the market.

In Phase 2, we carried out a distributor search, benchmarking six existing potential partners and identifying 5 new targets based on jointly-agreed evaluation criteria. We ranked their technical and business development capabilities according to whether they were high priority, high threat due to a conflict of interest, or if potential for growth existed. In addition to this, we carried out site visits to confirm the possible targets’ willingness and attractiveness. This resulted in the confirmation of one existing partner’s suitability and the suggestion of two previously unknown potential partners, which met the client’s criteria of geography, technical capability, business development opportunity, and compliance standards.

As a result, the client won two of the largest contracts in company history via the new distribution partner within one year after completion of the project. Moreover, we provided thorough market data for the short-, medium- and long-term, which the client could utilize in their strategy formulation and execution. For the future, we custom-made practical solutions, suggesting three distribution partners via analysis and segmentation based on applications and geography. Thanks to Fiducia and h&z, the client was able to grow their business quickly and sustain this growth throughout the coming years.

Fiducia – our Bridge to China In their capacity as cooperation partner Fiducia Management Consultings facilitates the business interests of h&z and their clients within the Chinese economic area. Due to its longstanding experience, the company has both a large network of international partners, as well as excellent understanding of the Chinese market. Using their profound knowledge of the complexity of Chinese economy, Fiducia facilitates international companies in their economic objectives. Fiducia is an independent company, led by the founding-family Kracht. Over 100 employees work at the strategically convenient locations in Beijing, Hong Kong, Shanghai and Shenzhen. Find out more at www.fiducia-china.com/de


20 Private Equity

“Operating Partners” Increase Focus on Operational Performance More and more private equity companies are reacting to increased performance requirements by establishing the positions of operating partners. They often come with track records from industry where they have held executive positions, and less often with the typical investment manager career that prevails in the private equity environment. Some private equity companies have established operating teams where they bundle their value creation know-how and from where they initiate operational performance improvement initiatives. The primary task of operating partners is to actively increase the value of portfolio companies during the holding phase, something that may be achieved via more or less active advisory board or supervisory board functions.

Operating partners do not require detailed knowledge of all company functions and business areas. Instead, they establish a network of specialized senior advisors and consultants to tackle the topics with the best specialists. Apart from an understanding of operations, strong communication skills and, for cross-border activities, intercultural sensitivity are the most important skills for operating partners, as they need to manage various starting positions. These range from small family-run businesses to highly professional organizations where the management teams have capital market experience. It becomes the key responsibility of an operating partner to create, cultivate and maintain a trustful working relationship between the shareholders and the portfolio company.

The trend towards the use of operating partners can be observed not only among private equity funds active in the large cap segment, but also in the mid cap segment in order to balance increased multiples with comprehensive value creation.

Spotlight on the Current SituationThe actual degree of “operational focus” varies from one fund to another. KKR, for example, has created a network of approximately 50 full-time operations professionals in the KKR-affiliated company Capstone, with whom the company works across functions during each new transaction. To some degree, it uses its own employees, but Capstone also coordinates the utilization of all specialized consultants. Triton, on the other hand, has created a position called “Head of Global Procurement” with the goal of identifying and realizing synergies across portfolios. To that end, the “combined market power” is generated by bundling all demands across the participating portfolio companies.


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New Sharing of Tasks and Specialization

There are specialists who are responsible for fundraising and origination. In other words, they are responsible for the work during the deal flow and subsequently for the due diligence phase until the successful transaction is achieved. In addition, there are now operating partners to facilitate value creation. Ideally, the operating partner is already involved in the due diligence phase to identify value creation potentials early on and to make sure they are reflected in the valuation.

Directly after closing, the operating partner assumes a leading role in the preparation of the value creation blueprint. The blueprint describes the measures for the development of the portfolio company, such as the future product portfolio, production footprint, or core competencies in manufacturing and logistics (see Figure 7). During the blueprint development phase, the role of the operating partner involves the evaluation of value creation potentials in operations based on existing infrastructure increases in future productivity, which are to be influenced and boosted by operational measures and investments. For the cash position, it is important to forecast and improve net working capital, especially in inventories.

Implementation of short-term measures may be commenced immediately. Such “quick wins” often lie in external value creation, which can be tackled by renegotiating the larger procurement volumes with the key suppliers and consolidating the supplier landscape, thereby bundling demands and leveraging economies of scale.

Ideally, the blueprint also accounts for and addresses cross-portfolio synergies where the company can benefit from optimized procurement terms in already bundled commodities. An example of this could include fleet or travel management. The operating partner can address the main topics with management without major delay. In most cases, the operating partner becomes a real partner of the operational management of the portfolio company by contributing optimization tools and specific experiences gained through the private equity network.

Figure 7: Blueprint development

Revenue development potential

Value creation blueprint

Implementation

Blueprint development (3-6 months)

Strategic scenarios and business plan

Cost improvement potential

Asset optimization potential

• Investment thesis

• Management plan

• Management workshop

• Investor’s sector experience

Deal closing


22 Private Equity

GlossaryAddressed volume Share of the total purchasing volume that is optimized within a project

Cash conversion Measure that expresses the length of time (in days) that it takes for a company to cycle convert resource inputs into cash flows

Category Purchased goods that are similar in nature and tendered in a combined manner

COGS Costs of goods sold

Consignee The receiving party of a shipment

Cross-portfolio Related to activities that are implemented across different companies/legal entities which belong to an independent portfolio of a private equity firm

Direct spend Commodities purchased for use in the products manufactured (as part of COGS)

Financial leverage Degree to which a company uses fixed-income securities such as debt and preferred equity

Fixed asset Long-term tangible piece of property that a firm owns and uses in the production of its income and that is not expected to be consumed or converted into cash

Holding phase The real or expected period of time during which an investment is attributable to a particular investor

Indirect spend Commodities purchased that are not directly attributable to the products manufactured, e.g. company cars, IT hard- and software …

Inventories Economic figure that tracks raw materials, work-in-process goods and completely finished goods that are considered to be the portion of a business’s assets that are ready or will be ready for sale

Liquidity Degree to which an asset or security can be quickly bought or sold in the market without affecting the asset’s price

M&A Mergers & Acquisitions

EBITDA multiple Valuation factor to determine the value of a company in conjunction with its EBITDA

MRO Maintenance, Repair and Operations/overhaul

Payment terms Conditions under which a seller will complete a sale, specifying the period to a buyer to pay off the amount due

Receivables Asset designation applicable to all debts, unsettled transactions or other monetary obligations owed to a company by its debtors or customers

Return Gain or loss of a security in a particular period consisting of the income and the capital gains relative to an investment

SG&A Selling, General & Administrative Expenses

Shipper The party and often the manufacturer sending a shipment

Supply chain Network created amongst different companies manufacturing, handling and/or distributing a specific product, encompassing the steps necessary to get a good or service from the supplier to the customer

Trade payables Amount that customers owe for their purchasers to sellers or suppliers; may also be referred to as accounts payable

Yield rates Percentage return on total investment, also called rate of return


23Private Equity

Authors

Dr. Joachim Dettmar is a partner at h&z and an expert for private equity and strategic market topics. His expertise lies in the areas of business strategy, optimization and benchmarking. Responsible for private equity clients and their portfolio companies, his focus is on matters such as due diligence and portfolio optimization. He also develops h&z’s partnerships, business ventures and expansion in the Asian markets in cooperation with partner companies NRI and Fiducia Management Consultants.

Dr. Markus Contzenis a partner at h&z, responsible for Mergers & Acquisitions topics. His particular areas of expertise lie in business model development, target research, due diligence and post merger integration. As expert for restructuring and reorganizations he supports customers from the private equity sector as well as industrial companies and financial institutions.

Markus Günthör is a consultant at h&z with special focus on private equity. His expertise lies in the areas of due diligence and corporate finance. He is also focusing on reorganization and optimization projects covering the whole area of supply chain management (e.g. logistics, planning, purchasing).

Company Profile h&z Business Consulting has been providing management consulting services since 1997 – with head, heart and hand. The company is one of Europe’s leading management consultancies focusing on business strategy & optimization, procurement, supply chain management, technology & innovation, sales & growth, service and training. h&z has offices in Munich, Dusseldorf, Vienna and Zurich. Customers include twenty of the DAX 30 companies and a number of small and medium sized enterprises (SMEs). 98 per cent of customers mandate h&z repeatedly. As a member of the Transformation Alliance, h&z is part of an international network with over 420 consultants in twelve locations.h&z is one of Germany’s best places to work, having received the Great Place to Work award several times.Find out more at www.huz.de.


24 Private Equity

www.huz.de

h&z Unternehmensberatung AGNeuturmstraße 5, D-80331 MunichPhone +49 89 242969-0

Munich • Dusseldorf • Vienna • Zurich


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